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Increasing venture capital is not easy. for some, it's impossible.
Clearbanc offers start-ups a fundraising alternative – although it's well capitalized by venture capitalists – and is launching a new campaign today to support 2,000 companies with non-dilutive capital $ 1 billion by 2019.
"Everyone is watching this wave of IPOs in the technology sector this year, but no one is talking about the few companies that actually have the founders," Clearbanc Co-founder and President Michele Romanow told TechCrunch. "Our vision is that if Clearbanc succeeds, there will be a world in which the founders will have a much higher percentage when they go public."
Here's how Clearbanc's new campaign, "The Terminary 20-Min", works: Clearbanc invests between $ 10,000 and $ 10 million in e-commerce businesses with positive ad spend and unit savings after its algorithm examined the marketing and revenue data of the startup. Clearbanc sends the money within 48 hours, does not sit on the board of directors and does not require a personal guarantee and continuously invests in the company, provided that these two key indicators – advertising expenses and unit costs – remain positive.
Here's the problem: until the company has repaid 106% of Clearbanc's investment, Clearbanc takes a percentage of its revenue each month, based on the size of the investment. Yes If you have a higher margin business, such as a digital fitness app, and are ready to divert 20% of your monthly income, Clearbanc will invest a larger amount from the start.
The whole process takes 20 minutes, hence its name – much faster than the time it takes for a VC to reach an agreement. But a value chain can spend months searching for a category and debating the potential of an investment. Clearbanc completely removes this process by relying on two metrics and an algorithm.
Romanow, who has made a name for herself as an angel investor in the Canadian version of Shark Tank, Dragons' Den, told TechCrunch that she and her co-founder and general manager, Andrew D & # 39; Souza, recognized the risk badociated with this type of quick investment, but having supported $ 150 million last year from 500 companies, they feel they have accumulated enough of data to prove their strategy.
Romanow and D'Souza insist that 40% of VC's dollars eventually go to Facebook and Google for digital advertising campaigns. Although TechCrunch can not independently verify this badertion, it is widely recognized that these platforms absorb a lot of capital from startups, especially e-commerce businesses, such as direct-to-consumer retailers for example, which rely almost entirely on digital marketing to attract their customers. customers.
By using Clearbanc, a company could, in theory, raise $ 5 million in venture capital to grow its business and an additional $ 5 million from Clearbanc for advertising expenses. This strategy allows businesses to save valuable capital.
"We are essentially a non-dilutive co-investor," Romanow said. "VC takes time, it's a lot of things, you really give up on equity that you can never recover. Initially, many founders did not calculate the value of their equity. Like the first $ 250,000 in Uber worth $ 1 billion now. "
Clearbanc, founded in 2015, has hired venture capitalists to fund its rapid expansion. Its own funding model does not work for a financial category company, as the indicators of success are totally different.
In November 2018, Clearbanc received initial financing of $ 70 million and Series A financing from Emergence Capital, Chamath Palihapitiya from Social Capital, CoVenture, Founders Fund, 8VC and others. Just a month later, Clearbanc announced the creation of a $ 50 million fund, funded by the new company Upper90, co-founder of Seamless, Jason Finger, to begin providing advertising money. startups.
"We've come to understand how to move up a gear," said Romanow.
The $ 1 billion it is currently selling is not readily available. Romanow says they have collected "enough money to deploy $ 1 billion this year," while making it clear that they have not raised the total amount and do not need to do so . Clearbanc consistently earns new cash through its revenue sharing arrangements and is able to quickly recycle and redeploy its capital. That, coupled with the hundreds of millions of sponsors – including Upper90, other founders, family offices, and university endowments that have not been made public – allows them to invest 10 figures this year.
Clearbanc is part of a new "capital as a service" business category that has either been rejected by venture capital firms or has been renounced from the equity model. equity. BlueVine, for example, provides startups with credit lines of $ 5,000 to $ 5 million. Lighter Capital invests between $ 50,000 and $ 5 million of non-dilutive capital in SaaS companies. Corl, another alternative lender, also supports businesses using the revenue sharing model.
"Venture capital makes sense if you build a new piece of crazy AI, or create a new product line and go to a new country," Romanow said. "When you do something that is replicable and scalable, like advertising spending, it makes no sense to forego equity"
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